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29 May 2020
bulgaria croatia czech republic hungary poland slovakia türkiye austria

The effects of COVID-19 on distribution of dividends in selected CEE countries

status as of 29 May 2020



Overview of potential limitations for distribution of dividends during the COVID-19 pandemic


The Austrian government adopted a new Directive of the Ministry of Finance, BGBl II 2020/143 (only available in German language here) relating to companies which make use of COVID-19-state aid:

  • pursuant to Sec 12.1.6, an applicant for COVID-19-state aid is obliged to refrain from paying dividends from 16 March, 2020 until 16 March, 2021 ("Dividenden- und Gewinnauszahlungsverbot") and to respect a moderate dividend and profit distribution policy for the remaining term;
  • the applicant undertakes not to liquidate any reserves to increase the balance sheet profit; and
  • the applicant shall not to use the liquidity received from the state aid (i) to pay profit distributions, (ii) to repurchase own shares and (iii) to pay bonuses to Management Board members or managing directors.

Besides, in April 2020, a motion ("Initiativantrag") for the amendment of Sec 235 of the Austrian Companies Code ("UGB") was submitted to the National Council, asking for the introduction of a new paragraph 3 according to which the ban on dividend payments under company law should generally be extended to recipients of COVID-19 support. The motion, however, was not (yet) implemented.

Irrespective of any COVID-19-state aid, Sec 82 para 5 of the Austrian Law on Limited Liability Companies ("GmbHG") is a general (long-standing) compulsive provision which prohibits dividend payments for reasons of creditor protection in case of severe losses or impairments, which not only temporarily reduce the assets of the company until the date of adoption of the financial statements ("Ausschüttungssperre"). This primarily affects companies with the due date for the annual financial statement on 31 December, 2019, in particular when they postpone their ordinary general meeting towards the end of the year due to COVID-19. In this connection, the following guidelines shall apply:

  • if losses are incurred between the balance sheet date of the annual financial statement and the adoption of the annual financial statement, the extent of the losses can be taken as a guideline for the existence of a significant reduction in assets of approximately 20 to 25 % of the balance sheet profit. Losses below this amount do not trigger the distribution ban. The percentage range mentioned may have to be modified in individual cases by specific circumstances of the company. However, the distribution ban is not triggered if sufficient free reserves are available; and
  • value reductions that do not lead to losses are not, or only in special cases, considered to be significant asset reductions.

Please note that Sec 82 para 5 GmbHG is neither applicable by analogy to stock corporations nor to limited partnerships with a limited liability company as general partner.

As regards banks and (re)insurers, EIOPA and the Austrian Financial Market Authority have urged (re)insurers to temporarily suspend all discretionary dividend distributions and share buy backs aimed at remunerating shareholders.


The Bulgarian government adopted several COVID-19-related financial mechanisms for funding of mainly small and medium enterprises (either by soft loans or grants), but none of these financial schemes impose any restrictions on the participating entities on distribution of dividends. However:

  • as part of the Covid-19 measures adopted by the Bulgarian National Bank, it is recommended that Bulgarian banks capitalise their profit for 2019 (hence, no dividend distribution recommended). However, it is not entirely clear what the exact scope of the BNB's recommendations is (e.g. whether they also concern distribution within the banking groups), as the short statement of BNB literally says that "the profit in the banking system in the amount of EUR 1,6 bln. will be capitalised". No further clarifications were given by banks or by BNB's governor; and
  • there are no official recommendations / specific laws adopted by the Bulgarian Financial Supervision Commission regarding insurance undertakings. The FSC, however, published the EIOPA's statement on dividends distribution and variable remuneration policies in the context of COVID-19, on their website. Hence, we may say that they support EIOPA's statement and share the same view.


COVID-19-related subsidies do not prohibit payment of dividends, but there was discussion on introducing this prohibition.

With respect to insurance/banking, no specific laws were enacted as the existing framework was used to issue the decisions on ban of payment of dividends as follow:

Czech Republic

No direct prohibition or restriction to distribute dividends, however:

  • The Czech National Bank recommended banks refrain from paying dividends;
  • if an entity needs an extraordinary moratorium protecting it temporarily from insolvency being declared over its assets, it shall provide an affidavit that it has not paid any dividends in the two months preceding 12 March 2020 or after that date; and
  • an export insurance company is entitled to provide a guarantee securing a loan extended by a commercial bank only if the loan documentation includes a prohibition to pay dividends.


In Hungary there are no COVID-19-related statutory dividend payment restrictions or prohibitions. However, the Hungarian National Bank (HNB) issued two guidelines:

  • the HNB called on banks and their owners not to approve or pay dividends until the end of September 2020; and
  • the HNB expects insurance companies to temporarily suspend all dividend and share repurchase payments. If the insurance company nevertheless decides to pay dividends or perform share repurchases, they must explain the reasons to the HNB.


No direct prohibition or restriction to distribute dividends, however:

  • The Polish Financial Supervision Authority (KNF) published a soft (i.e. informal) statement for banks and insurers in which KNF expects them to keep their entire profit for previous years (and not to distribute it to the shareholders; available only in Polish);
  • in case of any financing received from the Industry Development Agency (Agencja Rozwoju Przemysłu) or from its subsidiaries, as well as from other entities performing governmental programmes of support to entrepreneurs, such financing may not be designated for any payment to any related parties (including direct or indirect shareholders). If such financing was obtained, the entity should be able to demonstrate that the received financing was not paid to its related parties (arguably, under any legal title, including dividend); and
  • other financial support measures made available to entrepreneurs in general may contain restrictions on distribution of dividends resulting from contracts on such support measures signed by entrepreneurs with the respective public authorities.


No direct prohibition or restriction to distribute dividends.


A temporary article no. 13 (“Temporary Article”) has been added into the Turkish Commercial Code through the Law on Mitigation of the Effects of Covid-19 No. 7244 and dated 16 April 2020 (“Law 7244”):

  • joint stock companies and limited liability companies can only distribute / resolve on distribution of up to 25 % of the profit of the financial year of 2019 until 30 September 2020 (“Deadline”);
  • no dividend distribution can be made from the previous years’ (years before 2019) profits and no resolution can be adopted on advance dividends;
  • in the event that a resolution has already been passed to distribute (i) dividends from the profit of the financial year of 2019 exceeding 25%, or (ii) the previous years’ profits’, or (iii) advance dividends before the enforcement date of the Law 7244 (i.e. 17 April 2020), then the distribution of the portion exceeding 25% to the shareholders should be postponed until the Deadline; and
  • The Minister of the Republic of Turkey is entitled to extend the Deadline for an additional 3 (three) months.

The Trade Registries have been instructed not to register any dividend distribution resolution which is not in compliance with the Temporary Article.

The Trade Ministry has announced the implementation procedures and certain exceptions to the dividend distribution restrictions via the Communiqué on the Procedures and Principles Regarding Implementation of Provisional Article 13 of the Turkish Commercial Code No. 6102 (“Communiqué”), which was published at the Official Gazette No. 31130 and dated 17 May 2020.

Scope of Restrictions pursuant to the Communiqué

According to the Communiqué, the following principles regarding dividend and dividend advances shall apply:

  • capital companies cannot distribute dividends exceeding 25% of the net distributable profit for the 2019 financial year and the previous year’s profit and free reserve funds cannot be subject to distribution. Such restriction is not applied to the capital increases to be made from internal resources;
  • the general assemblies of the aforesaid companies cannot authorise the management body for advance profit distribution until the Deadline;
  • in the event that, prior to the enforcement date of the Provisional Article 13 of the Turkish Commercial Code, the general assembly has decided to distribute dividends out of the profits for 2019, however the payment to the shareholders has not yet occurred, or only partial payment was made, such portions of payments exceeding 25% of the net profit for 2019 will be postponed until the Deadline. No interest can accrue on the postponed payments; and
  • in case the management body has already been authorised by the general assembly, prior to the enforcement date, for the distribution of dividend advances, such advance payments shall be postponed until the Deadline.

Such provisions shall not apply to companies in which the state, special provincial administration, municipality, village or other public legal entity holds more than 50% of the shares or companies in which a public fund owns 50% of the shares and the state owns 50% of the aforesaid public fund.

Below mentioned financial statements shall be taken into consideration with respect to calculation of dividend amounts:

  • financial statements prepared in accordance with Turkish Accounting Standards determined by the Public Oversight Accounting and Auditing Standards Authority (only for the companies subject to the corresponding standards); and
  • financial statements prepared in accordance with Tax Procedure Law No. 213.

The dividend amount to be distributed cannot exceed the total amount of the funds subject to profit distribution under the records kept in accordance with the Tax Procedure Law No. 213.

Exceptions to the Restriction as per the Communiqué

The following companies shall be exempted from the restrictions under Law 7244 and the Communique:

  • companies which will distribute dividends with a maximum amount of TRY 120,000.

However, those who benefit from a short-term working allowances and/or took unpaid leave as per the Law No. 4447 due to force majeure caused by COVID-19, and those who benefitted from the credit guarantees supported by the Treasury and have unpaid debt balance are excluded;

  • companies which will perform their capital subscription undertakings (in cash) in another capital company provided that such capital commitment represents more than 50% of the dividend amount to be distributed; and
  • companies whose shareholders will use the dividend for repayment of loan payments and/or project finance agreements (which will become due by the Deadline) under the loan agreements and project financing facility agreements. However, the payment of dividend amounts under this paragraph that exceeds the shareholders’ payment obligations are postponed until the Deadline.

The Companies which fall under these exceptions and want to benefit from such exceptions are required to submit the relevant documents (proving the above circumstances) to the provincial directorates of the Ministry of Trade and to obtain the approval of the Ministry prior to the general assembly meetings to be held.



This article is part of our coronavirus-focused legal updates – visit our coronavirus infocorner to get more info!

authors: Katharina Mihalovic, Caroline Lichtenberg, Radoslav Chemshirov, Milena Gabrovska, Vice Mandarić, Ozren Kobsa, Gergely Szalóki, Paweł Halwa, Krzysztof Pawlak, Soňa Hekelová and Tomáš Šilhánek